Jamie Dimon shows his softer side, calls for regulatory pause in Europe
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Jamie Dimon shows his softer side, calls for regulatory pause in Europe

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JP Morgan’s chairman and chief executive was in sympathetic mood in Washington this week, advocating a pause in the regulation of banks in Europe that would give them time to get on with financing the real economy

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Jamie Dimon, chief executive and chairman of JP Morgan, has called for a pause in the regulation of banks in Europe, to give them time to digest changes already in the pipeline. His calls echo those of the European Commission, which called on the Basel Committee last week to shelve some planned capital increases.

“I believe, out of sympathy for the European banks, which have been deleveraging, catching up for the last seven years, that it’s time to let them stop and digest, and get on with financing the economy,” said Dimon, speaking to the Institute for International Finance annual meetings yesterday.

Mike Corbat, chief executive of Citi, said a level playing field between jurisdiction was important in a world of free trade and convertible currencies.

“It does feel like real divergence is emerging today, when you look at the regulation and standards that are talked about, there are different constraints in the US and Europe, and that starts to get to a dangerous place.”

While worries about European banks abound, Goldman Sachs president and COO Gary Cohn said that US banks were “in the best shape, by far”, and praised the rapid forced recapitalisation of the system after 2008 — compared with the European approach of hoping banks could earn their way out of their problems given cheap enough funding.

“The US banking sector in best shape it’s ever been, hands down, no debate, by far,” said Cohn. “Living through those moments was horrible, but US banks came through and were Tarped whether they liked it or not… Other regions have taken the approach that they’re not going to force capital on banks, they’ll give cheap funding and let them earn their way out of it.”

Sergio Ermotti, chief executive of UBS, first pointed out that his institution was not European but Swiss, before laying the blame on the slow change of business models at some banks.

“Some European banks have been slow to realise the change in paradigm,” said Ermotti. “We need to accept that big banks are a problem for Europe. There’s a need for critical mass, and good diversification of the banking system… each bank needs to find out its DNA, ask ‘what can I do for clients?’ and figure out how to get scale and geographical diversification in that area.”

He argued for consolidation in the system, but not simply to create larger banks — more to achieve scale in specific areas, noting also that it was very challenging to do a cross-border merger in Europe.

Ana Botín, chairman of Santander, said that her firm was not looking for any further consolidation (despite its acquisitive past), explaining that Europe wasn’t ready for it, with liquidity still ring-fenced in national banking systems. 

US banks chief executives were also quick to rule out large scale acquisitions in Europe. James Gorman, chief executive and chairman of Morgan Stanley said:  “There’s not much enthusiasm for banks getting bigger. It’s more getting adjustments in business models in Europe to get return of equity above cost of capital.”

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